2021 Luxury Demand Recovery Strong, The First Quarter Sales Which Strong?

In the past week, LVMH group, Kaiyun group and Hermes group have successively released their first quarter financial reports. Overall, after the impact of the epidemic in 2020, the sales of major enterprises in the first quarter of 2021 has shown a warming trend, and the luxury industry is gradually recovering from the epidemic. The key factor behind the sales rebound is not only the strong purchasing power of Greater China, but also the rapid development of the whole luxury industry on the digital road under the epidemic crisis. In the post epidemic era, various luxury brands strengthen and supplement the weak links in their sales chain. It is worth watching how they will walk out of the haze of the epidemic in the future.

LVMH leads the industry in terms of market value

In view of the fact that the quarterly financial data at the end of 2020 has shown a positive trend of slowing down, LVMH group, a luxury goods head company, officially "turns cloudy and sunny" after the beginning of 2021, ushering in a strong recovery of "negative for positive". According to the financial report data, the sales volume of LVMH group in the first quarter increased by 32% to 13.96 billion euro compared with the same period in 2020, and the organic growth (the organic growth refers to the growth after excluding the influence of M & A, asset divestiture and exchange rate, reflecting the growth potential and sustainability of core business) increased by 30% on the same period. Compared with the first quarter of 2019, which was not affected by the epidemic, the sales volume in this quarter increased by 8% year on year. By the time of press release on April 29, the market value of LVMH group had broken through the 300 billion euro mark to 319.07 billion euro. In terms of volume, LVMH group has become the absolute "King" among many luxury brands.

Photo by Xu Hui

Geographically, the United States and Europe excluding France accounted for 23% and 13% of total revenue respectively, while the Asia Pacific region (except Japan) led the way in 41% of revenue, with sales up 86% year-on-year. According to the different business divisions, except for the boutique retail business, all other business departments have contributed greatly to the recent outstanding performance. According to the financial report, LVMH's fashion and leather business grew by 37% in the first quarter compared with that in 2019, and 52% in 2020. Louis Vuitton and Dior, LVMH's two major brands, are the main force. Thanks to Tiffany, LVMH's watch and jewelry business soared 138% to 1.883 billion euros; Perfume and cosmetics sales surged 12% to 1.55 billion euros; Sales in the beverage sector rose 29% to EUR 1.51 billion. Due to the continued impact of store closures and international travel restrictions, boutique retail business, including Sephora and DFS, became the only business with a year-on-year decline of 5% in 2020 and 30% in 2019. However, the continued growth of e-commerce sales has offset some of the adverse effects.

According to vogue business analysis, the two brands, Louis Vuitton and Dior, mainly promote the recovery of the overall brand by raising product prices and increasing marketing investment. From last year to this year, Louis Vuitton has adopted several price raising strategies to cope with the decline in revenue. However, it has been proved that price increase can indeed increase the demand and purchase intention of consumers for brand products. Data show that a series of price increases contributed 4% to 7% growth in fashion and leather goods. In addition, when competitors choose to cut marketing expenses, the two brands continue to launch a large number of new products. They also pay more attention to marketing activities such as opening new stores and holding digital fashion shows, so as to keep their products continuously exposed on social media. Jean Jacques guiony, chief financial officer of Louis Vuitton, told vogue business that it now seems a wise decision to bet on big budget marketing activities that exceed market levels“ Some of the marketing events of Louis Vuitton and Dior made a huge impact. It was relatively easy because there was no one else doing propaganda at the time, but it's worth remembering that the quality of the work we do is more important than the amount of investment. " He also revealed that LVMH plans to increase marketing spending to 2020 levels after the overall environment recovers.

If Gucci rises, clouds will not fall

The signs of strong recovery are also reflected in the luxury goods enterprise Kaiyun group and its various brands. According to the latest financial report of Kaiyun group, driven by the strong momentum in the Asia Pacific region (up 83%) and North America (46%), the overall revenue of Kaiyun group rebounded to the pre epidemic level, and the first quarter revenue increased by 21.4% compared with that in 2020; It is up 5.5% compared with the same period in 2019 before the outbreak. Kaiyun group's online sales continued to grow rapidly in the first quarter, up 108% in this quarter, and online sales accounted for 14% of the total sales. As of press release, the market value of Kaiyun group was 81.32 billion euro, less than one third of LVMH group's market value.

In 2020, the performance of Gucci, the star brand of Kaiyun, dropped by 22.7% compared with that in 2019, and the operating profit dropped by 33.8%, which made the whole Kaiyun group fall into the downturn of performance, causing investors' concern. However, this year, gucci actively cooperated with the north face, caricature IP Duola dream, and even co branded with the sister brand of Kaiyun, such as Barista. Under the stimulation of repeated publicity, the revenue of this quarter finally showed signs of recovery. In the first quarter of this year, gucci recorded comparable sales of 2.168 billion euros, an increase of 24.6%, accounting for 60% of the group's total revenue and 80% of the total profit. "In our view, reviving Chinese youth's interest in brands is exactly what Gucci should do," Luca Solca, a luxury analyst at Bernstein consulting, said in a research report However, compared with the same period in 2019, Gucci's sales still fell by nearly 7%, which did not return to the level before the epidemic. Compared with the performance of LVMH's brands in the same period, Gucci's sales volume was still slightly lower than that of LVMH.

Meanwhile, Kaiyun group has realized that over reliance on a single brand Gucci will lead to the fragility of its overall revenue. Therefore, it has also accelerated the cultivation of brands with personality and growth potential, such as Saint Laurent, Bottega Veneta and barische, and seeks long-term and sustainable growth by building a more stable brand matrix. In the financial report, Bottega Veneta achieved the highest quarterly performance in the history of the brand, with sales up 19.9% to 328 million euros, up 35% from the same period in 2019 before the outbreak. In addition, on April 9, Kaiyun group announced the completion of the first phase of a new global logistics center in northern Italy. This global logistics center covers an area of more than 162000 square meters, combining the most advanced technology and automation technology, it can meet the future development needs of Kaiyun group in warehousing, retail, wholesale and global e-commerce business.

Hermes launches full range of products

According to the first quarter financial report released recently, Hermes not only proved that it can withstand the impact of new crown pneumonia better than its competitors, but also has achieved balanced growth of its brand through the strategic trial and distribution of the whole category. In the first three months of 2021, herm è s sales rose 44% to 2.084 billion euros in the first three months of 2021, up 33% from the same period in 2019, far exceeding the 24% increase expected by analysts. After the announcement of the 2020 financial report at the beginning of this year, Hermes shares, which were originally comparable to the Kaiyun group, rose sharply and broke through the market value of 100 billion euro at one stroke, setting a new record. It became the second luxury group with a market value of more than 100 billion euro after LVMH group. As of press release, Hermes market value reached 109.89 billion euro.

Eric duhalgou, executive vice president of finance, Hermes? T pointed out at the financial report meeting that last year, many other luxury brands increased product prices to mitigate the impact of the epidemic on business. However, Hermes group only raised prices for Europe and greater China by 1.4% in January this year, while Japan and America remained unchanged. Therefore, the sales growth of Hermes in this quarter has little to do with the increase of product prices. Eric also pointed out that online sales in all regions of the world increased by more than 100% in the first quarter, and the scale is expected to exceed 1 billion euro in the near future, so e-commerce is becoming the main growth engine of Hermes.

In terms of geographical distribution, sales in the United States surged by 94%, still the main force leading the first quarter. Sales in the US and Japan increased by 23% and 20%, respectively. However, the blockade and closure caused by the epidemic continued to cause losses to the European region, with average sales in Europe (excluding France) falling by 1% and France by 9%.

Looking at all business units, Hermes has recovered growth in all its businesses. Among them, clothing and accessories business, watches and other Hermes businesses have a significant growth. The clothing and accessories sector increased by 50.9% year on year, maintaining a strong development momentum; Sales of leather products and harness rose 33.6% due to strong deliveries at the end of last year; Other Hermes businesses also surged 93%, thanks to the popularity of household goods and jewelry. Although it entered the watch industry only in 1978, herm è s, which has original style design, can produce multi-functional movements and has built a factory, is undoubtedly a young leader, with an increase of 96.5% in the first quarter of this year. Since Hermes first tried water beauty in March last year, it launched the "rouge herm" è S "lipstick series has attracted the attention of the industry and consumers. According to the report, the perfume and make-up business grew by 21% in the first quarter, and herm è s plans to expand its beauty category from lipstick and eyelash brush to nail polish and Mascara in the future.

In addition, Hermes production bases in guilente and Seine Marne will be put into operation this year; There are also production bases in Earl Province, which are planned to be completed in 2022, Aden Province in 2023, and the second production base in ophne region to be completed in 2024. With the opening of these production bases, it is expected that the production capacity of Hermes will be further enhanced in the future.

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